2006 (8) TMI 579 - HC - VAT and Sales Tax

Summary

Issues:
Interpretation of Notification S.R.O. No. 1091/99 for concessional rate of sales tax on sale of rubber gloves to an industrial unit for use in manufacture.

Analysis:
The central issue in this case revolves around the interpretation of Notification S.R.O. No. 1091/99 regarding the eligibility for a concessional rate of sales tax on the sale of goods to industrial units for use in manufacture. The petitioner sold rubber gloves to an industrial unit charging a concessional rate of tax at five per cent. However, the authorities, including the Tribunal, denied the benefit on the grounds that the item sold was not consumed in the manufacture of products by the purchasing dealer. The key question is whether the consumption in the manufacture of only the item sold entitles the selling dealer to the concessional rate of tax under the notification.

The notification specifies that the eligibility for a concessional rate is available only when the item sold is used in the manufacture or processing of goods either by the industry itself or on behalf of others on a job-work basis within the State. The court observed that the consumption of the item sold in manufacture is not a requirement of the notification. The court emphasized that goods consumed in manufacture, such as industrial raw materials, components, packing materials, etc., would also qualify for the concessional rate. The court highlighted that the notification should be interpreted to supplement the statute and not limit its application to already available benefits under the Act, making the notification redundant.

The court rejected the contention that the purchasing industry should use the item in manufacture, emphasizing that the definition of "manufacture" in the notification only explains the activity that qualifies a purchaser for the concessional rate. The court clarified that while the manufacture of goods in the industry is a mandatory condition for eligibility under the notification, there is no indication that the items purchased should be consumed in manufacture, limiting the concessional rate to industrial raw materials alone. The court also noted that the declaration by the purchaser did not explicitly state that the item purchased is consumed in manufacture.

Furthermore, the court referenced a decision by the Calcutta High Court, emphasizing the essential nature of industrial gloves in manufacturing industries. The court highlighted that misdeclaration with regard to eligibility for the concessional rate could lead to the Department taking action against the purchaser. In this case, the Department did not take any action against the purchasing industrial unit, indicating compliance with the declaration.

In conclusion, the court allowed the sales tax revision case, vacating the Tribunal's order and confirming the first appellate order to revise the assessment and grant the concessional rate to the petitioner for the turnover covered by the declaration issued by the purchasing industrial unit.